The Morning Call--Soros: we are living in a bubble fueled by Fed liquidity

 

The Morning Call

 

8/13/20

 

The Market

         

    Technical

 

The Averages  (27976, 3380) recovered Tuesday’s losses yesterday, though the negative factors that I have been listing over the last week are still operative: (1) both of the indices made two gap up opens last week that need to be filled, (2) the VIX continues to reflect investor concern and (3) breadth remains in overbought territory.  So, some downside seems probable although it may not occur until the Averages (or, at least, the S&P) challenge their all-time highs (29568/3393).  Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside long term.

                        https://sentimentrader.com/blog/a-tale-of-two-sps/

 

Gold and the long bond were down again though only fractionally.  GLD’s chart remains strong plus it has that huge gap down open to close.  On the other hand, TLT ended right on its 100 DMA---the first sign of technical weakness.  The pin action of these two indicators is likely being impacted by their dramatically overbought condition.  The dollar was also down but not enough to close last week’s big gap up open.   

           

            Gold---the unloved hedge.

            https://contrarianedge.com/beloved-country-unloved-hedge/

 

            The case against owning gold.

                        https://www.etf.com/sections/etf-strategist-corner/500004-reasons-im-not-buying-gold?__cf_chl_jschl_tk__=f833c864da390f76d2f177f0905a6639f7edebec-1597257437-0-Af7_LD6G4A5lZwMil7GaJ53Vl55mSyyyujUd390sqwn7MZvUQLOVBZwHYxwIts9HO-xvJ7gW5RhLTIYFc64TSFS10n-GJFVu2HtfTB5BPV1bzj4HbI8Ty4gxqyeZoGxpctzT4nDuKx0b7Kl5e48WRWOnjr9ggMXu9xn31VklyqvCIB2I_lxRR67vM_CoQPLL2USkJBYIrDxsyh1J4aPNZ7yLnxNQDJR7uZQVO2Vc3y5YNxBTCPmw4MTemz5pmpdH7bxYknkghdJtgewGqKGOtZ0VuSwwXm28rzn3M4dAInSSb6MwrycvV2yQIaMfZj8UMsbeSXBUBXzPHKLoXW8dmUnDPmD5LGgwnyznxsKRgIKAjGCX_o4rs-7wSi370c76Vmrcle5YCVqLIwaLJD2RCK5ZDpz3i1hEHS9S08SbKbL5

 

            Mohamed El Erian on the dollar (weakness).

            https://www.project-syndicate.org/commentary/dollar-depreciation-2020-short-and-long-term-implications-by-mohamed-a-el-erian-2020-07?utm_source=project-syndicate.org&utm_medium=email&utm_campaign=authnote&

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/mega-cap-tech-stocks-soar-again-reflation-rotation-ends-abruptly

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly jobless claims fell 19% versus expectations of a 6% decline.

 

July import prices rose 0.7% versus forecasts of up 0.6%; export prices were up 0.8% versus 0.4%.

 

                          The July budget deficit was $63 billion versus estimates of $193 billion.

                          https://www.zerohedge.com/markets/budget-deficit-hits-record-us-spends-100-more-it-collects-ytd

 

                        International

 

                          July Japanese PPI was +0.6% versus consensus of +0.3%.

 

                          July German CPI was -0.5%, in line.

 

                        Other

 

                          Teetering on the precipice.

                          http://econbrowser.com/archives/2020/08/teetering-on-the-precipice-still

 

                          How strong will the Q3 economic rebound be?

                          http://www.capitalspectator.com/will-the-us-economic-rebound-falter-in-2020s-second-half/

 

                          A sign that the recovery could be stalling.

                          https://www.zerohedge.com/markets/bourbon-street-country-clubs-signs-recovery-stalling

 

            The coronavirus

 

              ***overnight update.

              https://www.zerohedge.com/geopolitical/germany-reports-biggest-covid-19-tally-3-months-outbreaks-spread-all-over-country-live

 

              The coronavirus wave in sunbelt states crests and begins to recede.

              https://politicalcalculations.blogspot.com/2020/08/coronavirus-wave-in-sunbelt-states.html#.XzQwKChKiM8

 

            China

 

              Has China’s central bank launched its own QE?

              https://www.zerohedge.com/markets/chinas-central-bank-has-quietly-launched-its-own-qe

 

              Chinese state run banks complying with US Hong Kong sanctions.

              https://www.zerohedge.com/markets/despite-diplomatic-bluster-chinas-state-run-banks-are-quietly-complying-trumps-hong-kong

 

            Bottom line.  Soros: ‘we are caught in a bubble fueled by Fed liquidity’.

            https://www.zerohedge.com/markets/soros-reveals-how-hes-invested-amid-fed-liquidity-bubble-says-trump-very-dangerous

 

              Interview with Eugene Fama, developer of the Efficient Market Theory.

              https://themarket.ch/english/inflation-is-totally-out-of-the-control-of-central-banks-ld.2476

 

    News on Stocks in Our Portfolios

 

UPS (NYSE:UPS) declares $1.01/share quarterly dividend, in line with previous.

 

What I am reading today

 

            The predator that makes great white sharks flee.

            https://www.theatlantic.com/science/archive/2019/04/great-white-sharks-flee-killer-whales/587563/

           

 

            How to watch tonight Perseid meteor shower.

            https://www.syfy.com/syfywire/the-sky-is-falling-heres-how-to-watch-tonights-perseid-meteor-shower

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

The Morning Call--More debt = slower growth

 

The Morning Call

 

8/12/20

 

The Market

         

    Technical

 

The Averages  (27696, 3333) gave investors a roller coaster ride yesterday, opening quite strong but selling off at the close.  It is likely that the negative factors that I have been listing over the last week exercised some effect on the results: (1) both of the indices made two gap up opens last week that need to be filled [neither was filled], (2) the VIX continues to reflect investor concern [yesterday, it was back above its March/April low] and (3) while breadth deteriorated, it remains in overbought territory.  So, further downside seems probable.  Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside long term.

                        https://quantifiableedges.com/looking-at-7-day-win-streaks/

 

            Stocks becoming less volatile.

            https://sentimentrader.com/blog/stocks-are-finally-becoming-less-volatile/

 

Gold and the long bond got hammered on huge volume.  Like equities, they were both overbought.  So, again a selloff was not surprising.  Their charts remain very strong and both made major gap down opens which need to be filled.  The dollar was the calm one of the group, rising only fractionally, likely being held back by last week’s big gap up open.

            https://www.zerohedge.com/markets/why-gold-bitcoin-surge-just-starting-real-yields-will-be-negative-until-financial-system

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/bonds-bullion-big-tech-battered-reflation-quant-quake-continues

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications were up 6.8% while purchase applications grew 2%.

 

July CPI was up 0.6% versus expectations of +0.3%; core CPI was up 0.6% versus +0.2%.

                          https://www.zerohedge.com/personal-finance/us-consumer-prices-surge-food-medical-costs-jump

 

 

                        International

 

Q2 UK GDP fell 20.% versus consensus of -20.5%, business investment declined 31.4% versus -2.5%, construction orders were -4.5% versus -6.2%; the June trade balance was L5.3 billion versus L2.8 billion, industrial production was up 9.3%, in line while manufacturing production was up 11% versus +10%.

 

                          June EU industrial production was up 9.1% versus estimates of up 10.0%.

 

July Japanese YoY machine tool orders dropped 31.1% versus forecasts of -27.0%.

 

                        Other

 

The double dip cometh?  (don’t let the author’s comment on Trump prevent you from getting the bigger picture).

                          http://econbrowser.com/archives/2020/08/the-double-dip-cometh

 

                          Mortgage delinquencies beginning to climb.

                          https://www.calculatedriskblog.com/2020/08/corelogic-overall-mortgage-delinquency.html

 

            The coronavirus

 

              ***overnight update.

              https://www.zerohedge.com/geopolitical/philippines-brazil-interested-russian-covid-19-vaccine-australia-suffers-deadliest-day                       

 

              College football’s coronavirus crisis.

              https://www.vox.com/2020/8/10/21355857/college-football-coronavirus-explained

 

              The Kodak loan---what were these guys thinking about?

              https://www.epsilontheory.com/get-me-tools-and-a-beer/

 

            The Fed

 

              More QEInfinity/Forever will not solve the problem.

               https://www.zerohedge.com/markets/throwing-printed-money-problem-wont-make-it-go-away

 

            Bottom line.  Higher debt = lower growth

            https://www.zerohedge.com/markets/beware-era-debtstolation

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Every goal needs a vision.

            http://traderfeed.blogspot.com/2020/08/avoiding-burnout-every-goal-needs-vision.html

           

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

 

The Morning Call--Willful blindness

Monday Morning Chartology

 

The Morning Call

 

8/10/20

 

The Market

         

    Technical

 

            The S&P continues its push higher, even though the Dow is lagging dramatically.   While my assumption is that its momentum is to the upside, (1) it made two gap up opens last week that need to be filled, (2) the February high [upper boundary of its intermediate term trading range] will likely offer some resistance, (3) equities are overbought and (4) while the VIX is directionally in sync, it is just barely so.  My guess is that stocks will consolidate after attempting to challenge the February high.

 

            The long bond is still struggling to push above those March/April closing highs.  After such a strong run, it is not surprising that it would need a rest at a resistance level. And remember TLT has been above both DMA’s and in uptrends across all timeframes for almost two months.  So, it will take a lot of negative pin action before this chart turns negative.

            https://www.realclearmarkets.com/articles/2020/08/07/how_the_bond_market_currently_describes_our_situation_501280.html

      

                        

            While GLD was down on Friday, it still closed above the upper boundary of its long term trading range for the fourth day, resetting it to an uptrend.  It is now above both DMA’s, in uptrends across all timeframes and has no visible resistance except the upper boundary of its new long term uptrend (400+)---clearly a major plus.  And there was even good news in Friday’s decline---it filled Wednesday’s gap up open.

 

            The dollar bounced hard on Friday.  Not surprising given that the rebound was off the lower boundary of its short term downtrend.  So, the downtrend is not is danger of being challenged.  Plus, UUP made a gap up open which needs to be filled.

 

            The VIX traded around the level of its June low all week.  While it closed below that low on Friday leaving it in sync with the S&P, its pin action is suggesting more uncertainty than that of the S&P.

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/tech-tumbles-weekend-copper-crumbles-silver-soars

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Weekly Review

 

The data (and primary indicators) last week was upbeat again.  Overseas the stats were negative.  Indeed, they seem to be trending that direction as the velocity of the initial bounce off March lows peters out.

 

Short term,  the economic recovery continues though the question of additional progress remains.  The progress in the numbers thus far has been insufficiently rapid so as to preclude a ‘V’ shaped recovery.  While the data could certainly re-accelerate, in its absence, the shape of the recovery is an issue.

 

Longer term, the economic growth will be influenced by how quickly virus treatments and a vaccine are discovered as well as the permanent impact this disease/government reaction will have on the spending and work habits of the nation. 

 

Whatever the shape of the recovery, I am not altering my belief that long economy will grow at a historically subpar secular rate due to the twin burdens of egregiously irresponsible fiscal and monetary policies---which, by the way, are becoming even more egregiously irresponsible as a result of measures being taken by the government and the Fed in dealing with the current crisis.

https://www.zerohedge.com/markets/3-reasons-treasury-rates-can-still-hit-0-part-iii-death-growth

                       

                        US

 

                        International

 

                        Other

 

            The coronavirus

 

              ***overnight update.

              https://www.zerohedge.com/geopolitical/wearing-masks-outdoors-now-mandatory-paris-who-warns-majority-world-still-susceptible

 

              Do masks work?

              https://www.zerohedge.com/political/worlds-top-epidemiologists-masks-dont-work

 

              Trump issues executive order to re-start the money flow.

              https://www.zerohedge.com/markets/furious-democrats-faced-daunting-question-will-they-dare-challenge-trumps-stimulus-orders

 

              No payment, no problem, until……..

              https://www.zerohedge.com/personal-finance/no-payment-no-problem-bizarre-new-world-consumer-debt

 

 

            The Fed

 

              Heading for a collapse.

              https://www.zerohedge.com/markets/gordon-were-heading-complete-financial-moral-political-collapse

 

                  At some point, you have to stop digging.

              https://www.zerohedge.com/markets/fed-wants-inflation-their-actions-are-deflationary

 

                  Time to position for the end game.

              https://www.zerohedge.com/markets/martenson-its-time-position-endgame

 

            Bottom line.  Whatever the timing of a vaccine, however receptive the population is to inoculation, however fully the economy returns to pre-coronavirus levels, the economy will still be stuck with trillions of new government debt that has to be financed and a Fed which almost surely will slow the rate of expansion of its balance sheet if not reverse it.  And, in the absence of a meaningful decline in equity prices, the Market will have to reconcile the current excesses in valuation with impact of slowing secular economic growth, a global financial system saturated with liquidity and their effects on earnings growth and inflation.

            https://www.zerohedge.com/markets/inequality-has-never-been-bigger-financial-assets-hit-record-620-gdp

 

    News on Stocks in Our Portfolios

 

Illinois Tool Works (NYSE:ITW) declares $1.14/share quarterly dividend, 6.5% increase from prior dividend of $1.07.

 

What I am reading today

 

           

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

The Morning Call--When the real money runs out

The Morning Call

 

8/7/20

 

The Market

         

    Technical

 

The Averages  (27386, 3344) continued their move up.  But (1) the Dow still hasn’t surpassed its June high, (2) both of the indices have made two gap up opens this week, (3) the VIX continues confirm the directional move of stock prices but not their magnitude, and (4) breadth is in overbought territory.  All in all, this pin action is not indicative of a solid trending Market, just a strong S&P.  Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside.

                        https://www.zerohedge.com/markets/filling-gaps

 

Gold was up another 1 3/8%, finishing above the upper boundary of its long term trading range for a third day (if it remains there through the close today, it will reset to an uptrend).  The long bond reversed itself yet again, putting it back above the uptrend off its June low but still below its March and April high closes.  It continues to vacillate at this key level.  Follow through. The dollar was unchanged, remaining below the lower boundary of its short term downtrend.  UUP and GLD continue to point to a weak economy but TLT could potentially be a leading indicator calling that scenario into question.

            http://www.capitalspectator.com/pondering-lower-real-yields-and-higher-inflation-forecasts/

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/endless-melt-gold-soars-global-stocks-turn-green-2020-apple-2-trillion-any-second

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

July nonfarm payrolls increased by 1,763,000 versus expectations of +1,600,000; the unemployment rate was 10.2% versus 10.5%

                          https://www.zerohedge.com/markets/trump-was-right-big-payroll-number-smashes-expectations-176-million-jobs-added

 

                        International

 

June Japanese household spending rose 13% versus consensus of +7.5%; June leading economic indicators came in at 85 versus 81.

 

The June German trade balance was E14.5 billion versus estimates of E10.5 billion.

 

The July Chinese trade balance was $62.3 billion versus forecasts of $42.0 billion.

 

                        Other

 

                          Household debt decreased in Q2.

                          https://www.calculatedriskblog.com/2020/08/ny-fed-q2-report-total-household-debt.html

 

                          Global economy shows signs of recovery in July.

                          https://www.markiteconomics.com/Public/Home/PressRelease/b9a1f47a1c714124a1b412da6b637e75

 

            The coronavirus

 

              ***overnight update.

              https://www.zerohedge.com/geopolitical/spains-virus-cases-surge-lockdown-imposed-investors-derisk-stocks

 

              America is headed for an unprecedented wave of evictions.

              https://www.thenation.com/article/politics/rent-evictions-homelessness/

 

              Second wave of layoffs are underway.

              https://www.zerohedge.com/markets/new-survey-confirms-second-wave-us-layoffs-well-under-way

 

            Monetary Policy

 

Bank of England leaves rates unchanged but voted against expanding its bond buying program.

              https://www.cnbc.com/2020/08/06/bank-of-england-holds-rates-steady-and-maintains-bond-buying-levels.html

 

            China

 

              Trump bans use of TikTok and WeChat.

              https://www.zerohedge.com/markets/trump-signs-executive-order-banning-tiktok-wechat

 

              US and China to ‘review’ results to date of Phase one deal next week.

              https://www.zerohedge.com/economics/uschina-phase-one-agreement-good-luck-compliance-review

 

              China helping the Saudi’s build nuclear capability.

              https://www.zerohedge.com/geopolitical/china-helped-saudis-build-secret-nuclear-site-extracting-yellowcake-wsj

 

              China/Russia ‘dedollarization’ reaches break though moment.

              https://www.zerohedge.com/economics/russia-china-dedollarization-reaches-breakthrough-moment-countries-ditch-greenback

 

            Bottom line.  When the real money runs out.

            https://www.zerohedge.com/markets/rabo-everything-can-appear-hunky-doryuntil-real-money-runs-out

 

              More for the optimists.

              https://www.marketwatch.com/story/the-stock-market-will-be-flying-high-in-a-year-for-2-simple-reasons-2020-08-05?mod=home-page

 

    News on Stocks in Our Portfolios

 

C.H. Robinson Worldwide (NASDAQ:CHRW) declares $0.51/share quarterly dividend, in line with previous.

 

Nike (NYSE:NKE) declares $0.245/share quarterly dividend, in line with previous.

 

What I am reading today

 

            Quote of the day.

            https://cafehayek.com/2020/08/quotation-of-the-day-3242.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

 

 

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